Corporate social responsibility, and its financial implications on Maltese corporations

Abstract

The concept of Corporate Social Responsibility (CSR) is quickly becoming embedded in corporate agenda. As a result company vision is extending from a onedimensional focus on corporate wealth maximisation to a strategy aimed at balancing the demands of multiple stakeholder groups. Purpose: This dissertation seeks to investigate the degree of CSR orientation amongst medium-sized and large manufacturers and financial services providers operating in Malta. Expectantly, different industrial sectors prioritise different CSR aspects; therefore this study extends towards determining whether investment in one CSR area comes at the expense of others. Finally, the association between CSR investment and corporate financial performance (CFP) is investigated. Design: Four stakeholder groups are identified as the major CSR stakeholders: employees, the environment, society and consumers. Industrial CSR orientation is determined by means of a questionnaire surveying expenditure levels incurred in relation to each CSR stakeholder group; whereas CFP is gauged by reference to respondents’ financial statements. The suggested trade off in investments in CSR groups, as well as the financial implications of CSR are assessed through statistical association tests. Findings: Analytical findings establish the financial services industry as relatively more CSR oriented than the manufacturing industry. The implied trade-off between CSR groups is statistically disproven. Finally, no significant association could be identified between CSR and CFP. Conclusions: Although the financial services industry has been established as the relative CSR leader, upon consideration of qualitative aspects of CSR, a shrinking industrial gap in CSR orientation is observable. Additionally, it may be concluded that statistical results explain very little about the financial implications of CSR. Implications: Such diminishing industrial gap implies that long-run ranking may not be as obvious. Finally, benefits stemming from enhanced CSR may surface after a longer time horizon subsequent to CSR implementation, than a single financial year.